A new report has suggested that Ireland’s economic growth will slow over the medium to long-term due to a range of factors, including the ageing of the population.
The research, produced by the Department of Finance and the International Monetary Fund, predicts that the pace of growth of Modified Gross National Income or GNI*, which is a measure of economic output, will moderate during the second half of this decade.
It forecasts that annual growth will average around 2.5% in the second half of this decade, before slowing to around 1.25% a year on average from 2030 to 2050.
This will then converge to just 1% by 2050.
However, range of high-growth and low-growth scenarios are also considered in the paper which show that average annual long-run economic growth from 2030 to 2050 could range from just over 0.5% in a low-growth scenario to over 2.5% in a high-growth scenario.
The analysis blames the slowdown on a number of factors, including increased demographic pressures arising from a rapidly ageing population leading to a declining workforce as a share of the overall population and an associated fall in the participation rate.
Another factor is an expected moderation in productivity growth as it converges to natural limits.
“Other fundamental changes are also underway – the need to decarbonise our economy, the need to meet the digitisation challenge, to name just two,” Minister for Finance, Michael McGrath said.
“We must plan for this now and the establishment of the Future Ireland Fund, and the Infrastructure, Climate and Nature Fund, as announced in the Budget on Tuesday, are important policy instruments that will help current and future generations address these fundamental changes.”
The publication of the report came as the Minister for Finance formally gave the country’s Draft Budgetary Plan out to 2024 to the European Commission and Eurogroup.
“All euro area Member States transmit their budgetary plans to the European authorities each year, in accordance with their obligations as members of the single currency,” the minister said.